Before the SPA Is Signed: How the UAE’s New Civil Transactions Law Regulates Negotiations, Disclosure and Confidentiality

Most commercial deals take shape long before anyone signs. The position under UAE civil law changed on 1 June 2026, when Federal Decree-Law No. 25 of 2025 (the Civil Transactions Law) came into force and replaced the 1985 Civil Code. Now the legislation itself addresses how negotiations are started, conducted and ended, what must be disclosed, and how confidential information must be treated.

Three connected sets of rules now apply to the negotiation phase, and they are relevant to mergers and acquisitions, joint ventures, investments, distribution arrangements and any other deal where one side relies on information supplied by the other.

The three duties in plain terms

1. Good faith: starting, running and ending talks

Negotiations must be proposed, conducted and ended in good faith. The law is equally clear that talking does not oblige anyone to sign. A party can walk away. What it cannot do is negotiate or withdraw in bad faith.

If it does, the other side can claim its actual loss. That is a deliberately limited remedy. Unless the parties have agreed otherwise, it does not extend to the profit the unconcluded deal might have produced. Wasted costs, such as due diligence and advisory spend, are the kind of loss that can fall within it. Deliberately holding back a material fact that affects the validity of the contemplated contract is treated as an example of bad faith.

2. Disclosure: what each side must share

Each party must disclose information that is of decisive importance to the other’s decision to contract. The commentary we reviewed describes the duty as applying where the other side is presumed not to know the information, or has placed trust in the party holding it. The duty is mutual, so it can apply to buyers as much as to sellers.

Three features set it apart from ordinary contractual risk allocation:

• A clause purporting to limit or exclude the duty is void.
• Where non-disclosure is alleged, each side has a role in proving its case: the one alleging non-disclosure must prove it, and the other must prove that disclosure took place.
• A breach can lead to more than damages. The aggrieved party can ask for the contract to be annulled.

3. Confidentiality: information received in negotiations

A person who uses or discloses confidential information obtained during negotiations, or through the contract, without permission can be held liable under the general rules of civil liability. This operates alongside any non-disclosure agreement. It does not replace one.

What the law does not do

The reforms are also onshore federal law. Commentary we reviewed indicates that the separate civil regimes of the DIFC and ADGM are not changed by them. Parties using those jurisdictions should confirm the position for their own structure.

Why the trail matters

Because disclosure disputes are likely to turn on what was shared, when and by whom, the record of a process carries real weight. Data room indexes, question-and-answer logs, disclosure letters, exclusivity terms and the reasons recorded for pausing or ending talks all become potential evidence. Commentators from other firms have observed that claims under these provisions are likely to be decided on evidence of conduct rather than general assertions of unfairness.

Practical Takeaways

1. Heads of terms and letters of intent are commonly drafted to state clearly which provisions bind, including costs, exclusivity and confidentiality. Damages for withdrawal can be agreed expressly, since the default remedy is limited to actual loss.
2. A contractual limit on the disclosure duty is void, so contract terms are generally better treated as an addition to the statutory duty than a substitute for it.
3. Contemporaneous records of what was disclosed, and why a process was paused or ended, are likely to be the most useful evidence if a claim arises.
4. A tailored NDA remains the main tool for matters the statute does not address, including how long confidentiality lasts and what happens to information on withdrawal.
5. Both sides carry the disclosure duty, so buyers can consider what they themselves hold that the seller might regard as decisive.

FAQ’s